Control your Project cost Using MS Project

-- Vivek Prakash

Cash Flow Report

Cost is on one side of the triple constraint triangle and up for negotiation almost every time any change occur in your project or project does not progress as per plan.. Limit on project fund often limits the options for the project manager. Error in estimation or any risk that get materialized directly or indirectly impact the project cost. There is no point in guessing or discussing how many projects have failed due to inappropriate cost estimation or cost going out of control because of low project management maturity or no tool is used for tracking the project cost.

MS Project is a great tool for cost control. It allows you to specify each and every cost attached to your project and provide you the platform to manage it with minimal efforts.  Cost and resources go hand in hand as funds allocated to project are used to procure resources only. The cost is controlled by controlling resources.

In the last post on managing resources, we discussed that there were three types of resources in MS Project. The Work, Material and Cost. Let’s understand what we need to do to control the cost  in MS Project.

For work resources (Human & equipment), we can specify rates per hour. The cost of a task is calculated based on rates of the resources allocated to that task and total amount of work, the resources are going to do on the task i.e. efforts X rates

For material resources (like cement, concrete, office supplies), we specify the unit for each  material …

… items (e.g. cubic meter, ton, piece) in which the consumables are estimated and measured. After specifying units, we need to give rates per unit consumption (e.g. $100/ton). The cost of the task is calculated based on rate and amount of consumption of the material on that task.

For cost resources (like travelling, food) , no rate is specified. The cost of cost resource does not depend upon the amount of work or consumption on the task but the actual expenses done.

Cost resources are used to account for the cost that is not charged by the amount of work to be performed on the task. Every incident of cost resource is independent and a different amount is paid. For example travelling—every time you go, you pay different amount and amount spent on one tour is independent of amount spent on other tour.

Let’s see what we need to do when we assign these resources to tasks. When a work resource is assigned to a task, percentage of work resource which is allocated to task is to be specified. However it does not change the cost but only impact duration.

When a material resource is assigned to a task, you can either specify a fixed amount of material estimated to consume on the task or a rate at which material will be consumed e.g. 50 ton/day. Cost resource are different and cost does not get calculated based on any rate or duration of task. Every time a cost resource is assigned, a planned cost is specified e.g. $200 for this tour and $150 for other tour

For every resource, you can specify how the cost will be accrued, at start, at end or prorated. If at start is specified, the cost is accounted as soon as task is started. If at end is selected, cost is accrued at finish of the task and if prorated is selected, cost accrual depends upon progress on the task i.e. if work is 10% accomplished, 10% of the total cost on the task is accrued.

To be continued…